Kiel Working Papers, Kiel Institute for World Economics
No 1500:
New Evidence, Old Puzzles: Technology Shocks and Labor Market Dynamics
Almut Balleer
Abstract: Can the standard search-and-matching labor market model
replicate the business cycle fluctuations of the job finding rate and the
unemployment rate? In the model, fluctuations are prominently driven by
productivity shocks which are commonly interpreted as technology shocks. I
estimate different types of technology shocks from structural VARs and
reassess the empirical performance of the standard model based on second
moments that are conditional on technology shocks. Most prominently, the
model replicates the conditional volatility of job finding and
unemployment, so that the Shimer critique does not apply. Instead the model
lacks non-technological disturbances to replicate the overall sample
volatility. In addition, positive technology shocks lead to a fall in job
finding and an increase in unemployment thereby opposing the dynamics in
the standard model similar to the “hours puzzle” in Galí (1999)
Keywords: labor market dynamics, technology shocks, structural VAR, search and matching, business cycle; (follow links to similar papers)
JEL-Codes: E24,; E32,; O33; (follow links to similar papers)
49 pages, March 2009
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